Reverse Mortgage Glossary

HECM Principal Limit Factor Tables, PL Factor Tables

The HECM principal limit factor tables are published by FHA and used by the reverse mortgage industry to calculate HECM reverse mortgage proceeds.

The tables contain lists of principal limit factors that establish the principal limit (PL). The principal limit is the percentage of the maximum claim amount (the appraised value for most people) that the lender is allowed to lend based on the borrower’s age and the current expected interest rate.

Where to Find the HECM Principal Limit Factor Tables

The FHA tables can be found on the HUD website at the links below. Note that they require Microsoft Excel to open. For case numbers issued:

How Principal Limit Factors are Used

Before we can calculate the pool of cash available through a HECM, we have to first establish the maximum claim amount, or MCA. The MCA is simply either the appraised value of the home or the FHA HECM lending limit, whichever is less. If we assume the value of the home is $300,000, which is less than the lending limit, then the MCA is $300,000.

Next, we take the youngest borrower’ age and the expected interest rate and use them to look up a PL factor in the principal limit factor tables. As of this writing (March 2019), the PL factor for a 70-year old and an expected interest rate of 5% would be 0.465. If we multiply the PL factor by the maximum claim amount, we get a PL of $139,500. This is the pool of cash available to the borrower at closing to pay off existing mortgages, supplement income or retirement assets, pay closing costs, etc.

A Easier Way to Calculate PL

If you would like a much easier way to figure out principal limits and PL factors based on home value, age, and various expected interest rates, check out our principal limit calculator.